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Effects of Air Quality Regulation on in Polluting Industries

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  • Randy Becker
  • Vernon Henderson

Abstract

This paper examines unintended effects of air quality regulation on decisions of major polluters, using plant data for 1963 to 1992. A key regulatory tool since 1978 is the annual designation of county air quality attainment status, where non-attainment status triggers specific equipment requirements for" new and existing plants. We find, in the later years of regulation, that, ceteris paribus, non-attainment status reduces expected births in polluting industries by 40-50%, resulting in a shift of polluting activity to cleaner, less populated attainment areas. Starting in the 1970s effects appear first for industries with bigger plant sizes and then, within industries, first for corporate plants relative to the much smaller non-affiliate, or single plant firm sector. In all industries, non-affiliates face less regulation than the bigger corporate plants, resulting in a permanent shift away from corporate plant production in some industries. Older plants benefit from grandfathering provisions greatly enhancing survival probabilities. Finally, the negotiation and permitting process under regulation appears to induce much greater up-front investments by new plants, so that, in non-attainment areas, regulation induces 50-100% increases in initial plant sizes compared to attainment areas. But for plants over 10 years of age there are no size differences.

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  • Randy Becker & Vernon Henderson, 1997. "Effects of Air Quality Regulation on in Polluting Industries," NBER Working Papers 6160, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:6160
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    4. Timothy J. Bartik, 2002. "The Effects of Environmental Regulation on Business Location in the United States," Book chapters authored by Upjohn Institute researchers,in: Wayne B. Gray (ed.), Economic Costs and Consequences of Environmental Regulation, pages 129-151 W.E. Upjohn Institute for Employment Research.
    5. Henderson, Vernon & Kuncoro, Ari & Turner, Matt, 1995. "Industrial Development in Cities," Journal of Political Economy, University of Chicago Press, vol. 103(5), pages 1067-1090, October.
    6. Levinson, Arik, 1996. "Environmental regulations and manufacturers' location choices: Evidence from the Census of Manufactures," Journal of Public Economics, Elsevier, vol. 62(1-2), pages 5-29, October.
    7. Hausman, Jerry & Hall, Bronwyn H & Griliches, Zvi, 1984. "Econometric Models for Count Data with an Application to the Patents-R&D Relationship," Econometrica, Econometric Society, vol. 52(4), pages 909-938, July.
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    Cited by:

    1. Arik Levinson, 2001. "An Industry-Adjusted Index of State Environmental Compliance Costs," NBER Chapters,in: Behavioral and Distributional Effects of Environmental Policy, pages 131-158 National Bureau of Economic Research, Inc.

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